Mary Anne and Pamela Aden—co-editors of the industry-leading The Aden Forecast—assess the current risks and rewards in the volatile stock, bond, currency, and gold markets.
The US dollar has soared. It likes the end of QE, better economic signs and the election results.
Plus, with the rest of the world still struggling, the dollar continues to be the world’s safe haven currency. For now, the US dollar index is rapidly closing in on its strong 89 resistance level.
It could stall near this area, but if it breaks clearly above 90, it’ll be exceptionally strong. Having lowered our metals position to 10%, we advise keeping these proceeds in US dollars for the time being. That is, 20% of your total portfolio should now be in cash US dollars.
The stock market has also soared. It too likes the good news, which is resulting in new record or bull market highs. The Dow Industrials and the Dow Transportations both hit new record highs, triggering another Dow Theory bull market signal.
This was reinforced by the S&P 500 (SPX), signaling stocks are headed higher. For new positions, we like the strongest, which are include SPDR Dow Jones Industrial (DIA), iShares Dow Jones Transports (IYT), and PowerShares QQQ Trust (QQQ).
The metals sector is extremely weak. It’s been whacked by the super strong US dollar and prices are likely headed lower. By breaking below $1180, which was a 16 month support, gold has confirmed the start of a second leg down in the bear market.
For now, our advice remains the same. That is, lower your metals position to 10% of your total portfolio (down from 20%). The market is telling us we have to lighten up.
For the time being, we continue to recommend holding ETFS Physical Palladium Shares (PALL) and your physical gold and silver.
Bond prices have been declining while interest rates rise. But the major trends remain up for bonds and down for interest rates. For now, this is just a downward correction in bond prices and it’ll likely be ending soon.
So continue to buy and hold our recommended bond funds. The ones we like best are ProShares Ultra 20+ Year Treasury (UBT), iShares Barclays 20+ Year Treasury Bond (TLT), and iShares Lehman 10-20 Year Treasury Bond (TLH).
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